The National Association of Pension Funds (NAPF) in the UK has written to FTSE 350 companies setting out the pay guidelines they expect to see applied in 2013.
In a letter sent to the chairmen of FTSE 350 companies, the NAPF stated that it was seeking a more robust link between executive rewards and company performance. Specifically the NAPF stated that it is seeking the following:
- Base pay increases to be capped at inflation and to be in line with the rest of the workforce. A sound and compelling rationale must be presented for any divergence from this principle;
- That performance conditions attaching to variable pay should be genuinely stretching and support the long-term growth of the business;
- Boards should take a more robust line when faced with peer comparisons / peer group benchmarking. Boards should reflect more on the drivers needed to enact their own strategies and less comparing themselves against their peers;
- Remuneration committees should be prepared to use discretion when finalising bonus payments and share award vesting to ensure rewards are aligned with the success of the business over time, and returns on capital are taken into account. Boards should show their authority when negotiating pay and be willing to take difficult decisions;
The NAPF also stated in the letter that where there is continued poor remuneration practice, directors who bear responsibility for such policy and practice are likely to meet opposition to their re-election.